Accounts receivable loans can be obtained by either pledging or factoring receivables. In the case of a pledging arrangement, the firm retains title to the receivables, and the lender advances funds to the firm based on the amount and quality of the receivables. With factoring, receivables are sold to a factor, who takes the responsibility for credit checking and collection of the accounts. With pledging, the lender does not assume credit risk and has recourse back to the borrower if payment is not made, whereas factoring is normally a nonrecourse form of financing. LO1